Affordable Care Act Could Lower Insurance Costs for Some Small Businesses

Numerous small business employers and owners are worried about their insurance costs rising under the health law next year. However, for some businesses, especially those with older workers or those who have employees who have been ill, costs may actually decrease according to business owners and insurance brokers.

Under a stipulation of the Affordable Care Act (ACA), which goes into effect in January, insurers will be forbidden from setting rates for healthcare coverage based on the health status of employers or their employees are at businesses with less than 50 or 100 workers, depending on the state. Rather, the rates will be announced on government-run health insurance marketplaces, or online exchanges, which are meant to extend the additional costs of insuring higher-risk policyholders, like those with prior sicknesses or pre-existing medical conditions.

A survey conducted in April by The Wall Street Journal and San Diego-based executive mentoring group Vistage International Inc., found that 12% of 783 businesses with less than $20 in yearly revenue believe their insurance premiums will be cheaper or stay roughly the same under the ACA. Similarly, a survey by eHealthInc. done in February found that 11%of 259 small business employers, most with less than 10 workers employed at their businesses, said they think their rates will go down next year.

Some business owners say costs could go down if the exchanges produce cheaper rates on individual plans, which would lead some employees to drop their employer-sponsored plans completely.

Both early renewals and self-funded plans will end up keeping more groups off the exchanges, which will reduce the savings for high-risk policyholders. Besides that, any savings from the exchanges will be contingent on whether they’re up and running by Oct. 1, the deadline for offering coverage that will be effective come January.

The federal government’s own health-insurance exchange for small businesses, called the Small Business Health Options Program, or SHOP, which it will supervise in 33 states, isn’t expected to be fully operational and available until 2015.

Reasons Behind the ACA Employer Mandate Delay

The Affordable Care Act employer mandate has been delayed by a year to 2015, announced the U.S. Treasury Department on July 2. The reprieve will give businesses some breathing room as they are now able to postpone offering worker health insurance for another year. Though the official reasoning behind the delay was to help businesses begging for more time, left unstated was the fact that the federal government hadn’t written key guidelines for employers, according to current and former administration officials, and computer systems that were supposed to run the program were not yet operational.

“The administration’s decision… to delay the implementation of the employer mandate is welcomed by the business community and will help avoid some serious near-term economic consequences of this law,” said U.S. Chamber of Commerce President and CEO Thomas Donohue in a statement.

The Affordable Care Act (ACA) passed in 2010, and was set to go into effect on January 1, 2014. It required businesses with over 50 full time workers to offer affordable healthcare to them. The ACA demanded employer coverage just for those who work over 30 hours per week for a period of a month. Depending on the size of the company and the state in which it’s located, a business may be able to buy a less expensive small group policy through a standardized insurance exchange. If a company has fewer than 25 employees but they choose to offer insurance anyway, the ACA will provide a tax credit to balance the price. Smaller companies also have more incentive to self-insure, in which the businesses take on the financial risk of offering health benefits to its workers. Rather than paying premiums to insurers, they pay claims filed by workers and health care suppliers. Larger corporations with hundreds of employees or more often self-insure as well because they have the cash on hand to pay the majority of the claims filed right away.

The government’s computer systems are being tested now, but experts say there’s no way to tell how well they will work before the launch October 1.

According to an official in Obama’s administration, the Treasury Department realized they couldn’t address concerns and questions raised by employers in time for the employer mandate to go into effect, so they had to push the date back. He said the postponement was caused partially by the limited staffing and the wait for the Supreme Court’s review results.

“They were so late putting out regulations, and even as of today they have not produced proposed regulations, they knew it was not realistic to expect employers and insurers to implement their system changes,” said Catherine Livingston, a former health care counsel at the IRS.

According to the Treasury, the latest change won’t affect the individual mandate which demands most taxpayers buy insurance or pay a government fine. The timeline hasn’t changed for the application of the individual and small businesses exchanges – which are marketplaces where people and business owners can shop for insurance at the state level. The Department of Health and Human Services insists they’re prepared to open the exchanges as planned.

Healthcare Options for Small Businesses are Limited until 2015

The Obama administration recently verified that part of the 2010 health-care law geared toward helping small businesses offer insurance to their employees will be pushed off by a year.

The department overseeing Medicaid and Medicare announced that the launch of the federal SHOP Exchange, an online marketplace where businesses with less than 50 workers would be able to buy insurance for their employees and get a tax credit, would be on track for Oct. 1. However, the initial expectation that employees would be able to choose from a variety of plans has been quelled as they will only have one option for a plan. The full selection of healthcare plan options won’t be available until 2015.

The postponement recommended earlier in the year upset some business supporters and provoked questions about whether the administration was lagging on the implementation of the healthcare law.

While large companies will be obligated to provide insurance starting next year under the law, it will be optional for those with less than 50 employees. John Arensmeyer, head of the Small Business Majority, an advocacy group that supports the health law, said the news would probably deter some companies from offering insurance to their employees.

States that already established their own health insurance exchanges won’t be impacted by the delay.